1. |
Perspectives for the review
(1) |
Major items to be considered
- Consideration of the need to further articulate the basic nature of the Financial
Inspection Manuals
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For example: Consider the comment that the Financial Inspection Manuals
would be legally binding on financial institutions (clarify the manualsf nature as a
non-binding handbook for use by inspectors and their relationship with administrative
measures that might be taken as a result of inspections).
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- Further consideration on how best to assure the effectiveness of risk management systems
(including the role of the board of directors), from the perspective of financial
supervision.
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For example: Consider the comment that allowances should be made for
delegation of responsibility for risk management etc. to sub-committees under the board of
directors.
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- Consideration of the need to take account of the issue of a credit contraction, since
there have been worries expressed that the application of the Financial Inspection Manuals
might lead to a contraction of credit, including lending to smaller businesses.
- Consideration of the need for differentiation in the contents of check points according
to the size and nature of the financial institution under inspection.
- Consideration of the merits of individual arguments made in other comments.
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(2) |
Basic considerations in the review process
The review should assume that the nature of the Financial Inspection Manuals is
that of a handbook for inspectors, and should take account of the following
considerations.
- Recovery of domestic and foreign confidence in the Japanese financial system
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Japan must establish financial administration and financial institution
management that takes account of international perspectives and is also acceptable to
depositors and taxpayers, in order to stabilize and revitalize the Japanese financial
system, and to restore the domestic and foreign confidence in Japanese financial
institutions. The Financial Inspection Manuals are expected to serve this end, through an
enhancement of the inspection and supervisory regime.
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- Establishment of financial institution management based on the principle of
self-accountability
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Financial institutions are private companies. The role of financial
authorities is to use inspections to encourage financial institutions to engage in
appropriate internal management based on the principle of that the financial institution
itself is ultimately accountable for its actions.
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- Assurance of smooth supplies of funding and appropriate risk management
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The role of financial institutions is to engage in necessary risk taking
while appropriately managing their risks. Financial authorities should encourage through
inspections the smooth supply of funding to borrowers engaged in sound business
activities, while also ensuring the soundness of financial-institution operations.
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- Establishment of transparent, rule-based inspection and administration
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Financial authorities should, through the publication of the Financial
Inspection Manuals, eliminate discretionary measures wherever possible, seeking instead to
establish fair and transparent inspection and administrative regimes based on clearly
articulated rules.
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